American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009, called a "stimulus bill" by its supporters but branded a "pork bill" by its opponents, was passed by Congress on Friday the 13th of February 2009 after a vote sharply divided along party lines. The legislation's stated purpose was to invigorate an economy that was still spiralling downward in an ongoing recession.

While some elements served the package's stated purpose and helped to soften the recession's impact, the overall package was not well designed to foster a speedy recovery or set the stage for long-term growth. Instead, the "stimulus" was oriented to sectors that liberal Democrats believe are deserving of much greater federal help. [3]

Conservative Republicans proposed a similar bill about one-third smaller in dollar terms, but were overwhelmed by solid Democratic control of the House. The bill passed the Senate because three Republicans broke party ranks to vote for it; one of them[1] soon switched to the Democratic Party.

The bill passed the House and Senate with only three Republican senators voting for it and no Republican votes in the House and was signed by the president on February 17, 2009. Since the passage of the "stimulus" bill, over 4 million American jobs have been lost, in spite of Obama's promise that 4 million jobs would be created or "saved".[2] At $789 billion it is one of the most expensive proposals in world history. The Republican counterproposal was similar in scope but totalled only $500 billion.

It was promoted by Democrats as an "economic stimulus" package that will revive the ailing U.S. economy (see Recession of 2008). They promised it would add or save 3.5 million jobs, at a time when over 600,000 jobs are disappearing every month.

Conservatives complain that it is mostly spending to promote long-standing liberal causes.

"The plan is primarily designed not to stimulate the economy, but the size and scope of government. More citizens will be dependent upon government largesse. This empowers the Democratic Party and its liberal elite."[3]

Contents

Provisions

The total of $789 billion includes $275 billion in tax cuts and $514 billion in new spending.

It includes $170 billion for infrastructure projects such as highways, internet broadband and public-housing repairs. Of that, about $40 billion will go to the Energy Department. The act will fund projects to create a "smart" electric grid, build electric automobiles, and make homes and buildings more energy efficient.[4]

There will be $275 billion in tax cuts, including a $800 cash rebate to most families that will be spread out over a year, and an extra $250 quick payment to every person over age 65. The spending provisions cover a very wide variety of projects.[5]

Responding to public outrage against bankers who paid themselves billions of dollars in bonuses while their banks were collapsing and investors losing 95% of their money, the bill imposes tight restrictions on executive bonuses at financial institutions. The provision, inserted by Senate Democrats over the objections of the Obama administration, affects banks that have received financial bailout funds. It prohibits cash bonuses and almost all other incentive compensation for the five most senior officers and the 20 highest-paid executives at large companies that receive money under the Treasury’s Troubled Asset Relief Program, or TARP. Bonuses are limited to one-third of salary and must be in a form that is paid out only after the banks repay their loans from the government.[6]

Health Care Provisions

President Obama's stimulus package included provisions that had little to do with stimulating the economy, such as "health rules," of which will affect "every individual in the United States."[7] It created a new bureaucracy, the National Coordinator of Health Information Technology, which will monitor treatments to make sure doctors are doing what the federal government deems appropriate and cost effective: Donald Berwick was appointed by Barack Obama to manage the health care rationing agenda. These provisions in Obama's stimulus bill are also identical to what Tom Daschle prescribed in his 2008 book, Critical: What We Can Do About the Health-Care Crisis. According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”

Cartoonist Chuck Asay summarizes the debate

Conservative criticism

"The strategy under this bill is to throw billions of dollars in every bureaucratic direction, and cross our fingers and hope for the best," said Rep. Ken Calvert (R., Calif.) during debate. Rep. David Obey (D., Wis.), the chairman of the House Appropriations Committee, responded, "We need to compare the cost of this package against the cost of doing nothing. The cost of nothing would be catastrophic."[8]

Liberals supporting the measure say it is aimed at preventing the economy from "collapsing" and at "restoring it to normal" by spending money that the private sector is too frightened to spend. Conservative critics predict it will do little to help the economy recover and is filled with non-essential spending.

The Heritage Foundation says, "But government spending plans do not stimulate the economy. They are based on the idea that feeding “new” money into the economy will create economic growth. But the money isn’t new—it’s either taxed or borrowed. It's essentially redistributed from one group of people to another, and no new money is created."[9]

The Congressional Budget Office says $347 billion more in interest will be the result, which brings the total plan over 1 trillion dollars.[10] According to the CBO analysis, timely spending of the money will be hampered by bureaucratic delays of up to two-years and the inability of state and federal agencies to efficiently and effectively spend the massive inflows of new money.[11]

House Republicans proposed a bill tilted more sharply toward tax cuts, which they say will generate the most economic activity the fastest. Their substitute proposed cutting individual and business taxes as well as reducing much of the bill’s spending; it was rejected by a party-line vote of 170-266. The failed GOP measure totaled about $479 billion, a little more than half the total passed by the Democrats.

Support from state governors

Most Republican governors have broken with their GOP colleagues in Congress and are pushing for aid that would send billions to states for education, public works and health care. Since their state treasuries drained by the financial crisis, governors would welcome the money from Capitol Hill, where GOP lawmakers are more skeptical of Obama's spending priorities. The bipartisan National Governors Association called on Congress to quickly pass the plan, saying:

"States are facing fiscal conditions not seen since the Great Depression — anticipated budget shortfalls are expected in excess of $200 billion. Governors support several key elements of the bill critical to states-increased federal support for Medicaid and K-12 and higher education; investment in the nation's infrastructure; and tax provisions to spur investment."[12]

Several of the most conservative Republican governors have rejected one part of the stimulus, which increases amounts for unemployment insurance because it expands the coverage of the program and would be hard politically to reverse when recovery comes.

Tax rebates

The 2009 bill includes tax rebates that resemble in part the $152 billion stimulus law proposed by President George W. Bush and passed by Congress in Feb. 2008. However those 2008 rebates were mostly (85%) saved and used to pay down debts rather than make new purchases, so they may have failed to stimulate the economy in 2008.[13]
Some studies show that both the 2001 and 2008 tax rebates were both surprisingly effective.[14][15]

Congress

The House of Representative passed the bill January 28, 2009 by a vote of 244-188; all Republicans cast a no vote as did eleven Democrats. The Senate needed 60 votes to avoid a filibuster, and the bill won the support of all 58 Democrats and 3 republicans. (There is one vacancy.)[16]

"We all understand the economy is in crisis," Republican Senator John Cornyn said. But he and numerous Republicans announced they would vote “no” rather than endorse a bloated bill that will be paid for by future generations of taxpayers.

Senator Charles E. Schumer, Democrat of New York, countered by alluding to the deficits that accumulated during the Bush administration and asking rhetorically, "Where were my colleagues on the other side of the aisle for the last eight years?"

The final version easily passed the House, which requires only a majority vote and where the Democrats hold a 255-to-178 advantage. Seven House Democrats voted against the final bill; no House Republicans voted for the final bill. In the Senate, 60 votes are required to avoid a filibuster that can kill legislation, and the Democrats have the advantage 58-41, with one vacancy as Minnesota continues to count votes from the Nov. 2008 election. Therefore, at least two GOP senators are needed, and the three voted yes (two from Maine and one from Pennsylvania.)

Conservative Charles E. Grassley of Iowa, the most senior Republican on the Senate Finance Committee, complained that 34 states and the District of Columbia will receive less Medicaid money than larger states. The stimulus package "shortchanges" Iowa by $185 million, he said. "It disregards the tough economic situation facing our state and others, and it fails to understand that the recession is hitting places like Iowa a little later than other states, but it is still hitting us."[18] Grassley's efforts to amend the bill were voted down by the Democrats.

We all understand the economy is in crisis,” Mr. Cornyn said. But he was among numerous Republicans who said they would vote “no” rather than endorse a bloated bill that will be paid for by future generations of taxpayers.

Senator Charles E. Schumer, Democrat of New York, countered by alluding to the deficits that accumulated during the Bush administration and asking rhetorically, “Where were my colleagues on the other side of the aisle for the last eight years?”

There was no suspense about the outcome earlier Friday in the House, since the Democrats hold a 255-to-178 advantage in the chamber.

Impact

Cartoonist Gary Varvel ridicules the liberal argument

Unemployment climbed steadily month by month after the stimulus became law in February, reaching 10.2% in October 2009. Liberals said not enough money had been spent fast enough, and indeed the Obama Administration was very slow in getting the money spent.

Non Essential items

Conservatives, represented by House Minority whip Eric Cantor, R-Va., complained, “This was not a stimulus bill. It was a spending bill.” [19]

Some of the "stimulus" proposals attacked by conservatives:

$650 million for digital TV coupons

$600 million for new cars for the federal government

$6 billion for colleges/universities

The plan establishes at least 32 new government programs at a cost of over $136 billion [20]